Bruce's Blog

New Zealand’s timber manufacturing industry is firmly in the grip of one of its most challenging periods in recent history. A weak domestic market, escalating compliance costs and relentless price pressure are pushing mills to the brink. At the same time, uncertainty surrounds export opportunities, leaving the sector vulnerable in ways that will have long-term consequences if not addressed.

The slowdown in residential construction is stark. Housing consents have fallen sharply from their post-Covid highs, and renovation activity is subdued as households tighten spending amid high interest rates and job insecurity.

For sawmills, this means weaker demand for structural timber, and increased pressure from merchants and housing companies seeking lower prices.

While revenue is being squeezed, costs are climbing. Compliance obligations — covering health and safety, environmental management and reporting, and treatment regulations to name a few — continue to add complexity and expense.

Energy prices remain stubbornly high, and labour costs show little sign of easing. Together, these factors erode already thin margins and leave mills with limited options for reinvestment or innovation.

In an effort to maintain at least minimum production levels, balance stock and bolster cashflow, some sawmills are forced to cut timber prices to unsustainable levels by “doing deals”. While this approach may keep machines running in the short term, it creates systemic risk — when mills fail, local capacity disappears, along with jobs and regional economic activity.

Logs sent offshore enter a price-taking commodity market, where international demand (primarily from China in this case), shipping costs, and currency fluctuations dictate returns.

In contrast, processed products including engineered wood, outdoor product solutions, other specialty products and even standard structural timber can capture significantly more value — if we can develop markets and scale production. Achieving this requires investment in technology, marketing and logistics, along with strong partnerships across the entire value chain.

This is not a challenge sawmillers can solve alone. Government, industry bodies, and even forest growers all have a stake in preserving and growing domestic processing capability. That means:

• policy settings that encourage onshore processing investment, not just raw log exports,
• innovation funding to support product development and market diversification, and
• collaboration between growers and processors to ensure log supply security and shared value creation.

If these issues are left unchecked, New Zealand risks hollowing out its timber manufacturing base, forfeiting more value to overseas processors, and undermining the resilience of its construction sector.

The decisions made today will determine whether timber manufacturing remains a cornerstone of New Zealand’s economy or becomes another story of lost opportunity. The sector needs strategic support, coordinated action, and a shared commitment to add value here — not to ship it away.